All Forum Posts by: Jerry W.

@Darek J., I don't have a regular form, but I require the seller to do letters for me to the tenants telling them that I am the new owner, and then I send them a letter as well.  It is is common that the lease has expired and they are month to month so I notify them of a rate increase, but offer to not implement it if they come in and sign a new lease.  I am sure there are many other ways of doing it.

OK I am going to masssively disagree with most of what has been said here.  I almost don't know where to begin.  I have never heard of any statistic in my over 30 year career as an attorney of a 90% rate of landlords being sued.  I have never heard of anything close to that.  Maybe just maybe you might hit 10% but keep in mind most of that would be small claims for getting their deposit back, or something like that is limited to a few thousand dollars.  Based upon the number of landlords in the country a 90% rate would pretty much choke up the courts.  Think of all the divorces and criminal cases out there already taking the vast majority of the courts time.  The study linked was about corporations with annual income of under $100 million a year, between $100 million and 999 million a year and over 1 billion dollars of incom a year.  With that much going on of course there will be lawsuits.  Lots of sexual harrassment, lots of civil rights claims of folks fired or not promoted, lots of contract disputes, etc.  I realize that lawsuit rates can vary from state to state with states like CA having a huge amount compared to many others.

If you own or run a business through an LLC you cannot be sued. Not true. Anything you do in a personal manner can cause you to be sued regardless of an LLc or corp being present. The obvious, if you drive a company car on company business and run a stop sign and hit someone, both the LLC and you will be sued. Lets say you have a trust and an LLC and another LLC and a shell LLC and you drive a car and hit someone you will be sued. Now who is going to run your trust, and your LLC and your shell LLC? Are you going to hire people for everyone of those jobs for your 10 rental houses? You can just kiss all of your profits away, and in fact will probably lose money. Who will sign offers to purchase property, who will show houses who will sign rental agreements, who will arrange with banks for loans, who will personally guarantee loans for the houses you buy? Try getting a loan for an LLC with no assets or a shell LLC from a bank. Now if you have a local LLC and you buy a house and sign the offer and closing documents, but turn over control to managment company, and they hire contractors to fix stuff and they screen renters and they determine how much to keep of the damage deposit, how are you going to be liable? How will they ever pierce the viel? Dam unlikely as far as I can see. Look at ALL of the big operators on this site. None of them do anonymous investing. What about all of the talk about going to REI meetings and networking? How do you do that while being anonymous? I an assure that a real suit for real damages will cut through anonymity like a hot knife through butter. The question is are you legally liable? Yes many folks will lie to create liability, but if you never had your hand in it they cannot get to you whether known or not. As to shell LLCs, undercapitalization is a real reason to pierce the corporate veil. If they can show the LLC was intentionally undercapitalized that is a basis to pierce the veil.

Furthermore these setups are not free and the accounting can be very demanding in forms of book keeping. If you have 5 sets of books to keep for every single property you buy as an investor you will never get anything else done. at 10 properties that is over 50 sets of books. Even if you only have 3 properties that is 30 sets of books. I am sure some folks in high risk businesses could use this. Run a bar or put on events like drag racing, and you will draw more lawsuits. Still if you personally serve someone too many drinks you will be sued personally. Now if you only hire the bartenders or bouncers you have one layer of protection, but you can be sued for failing to supervise or properly train them. So you let someone else manage the bar, and hire, and train folks and have an LLC hire the company who runs it. Now you don't need anonymity because you cannot really do an act to create liability. Would anonymity help you? Absolutely, but the odds of them winning is so tiny why worry.

How many folks on BP can afford to hire a company to hire people to run their business and do no work themselves in it for 10 properties.  Who will interview and hire contractors?  Who will draw up the rental add?  You see what I mean.

Don't buy into this model that less than 1% of folks on BP will see any benefit from.  LLcs or corporations are very important protections from suits, so are hiring good folks to work for you, but most really cannot afford to hire everything to be done.  If you can afford that you are so rich you can afford to just do syndication.

I am with @Jay Hinrichs on this.  Many of these posts are really aimed to sell you something.  How many posts have you seen from folks not selling these things saying how well they worked?  I get there are unscrupulous lawyers out there, but using one or at most 2 layers of LLcs is more than adequate for most folks on this site.  If you self manage these big anonymity schemes simply will not work.

@Janelle Vigario, I don't want to hijack a thread but want to give feedback to you and @Brian Lynch.  I got into real estate investing in the early 1990s.  A broke contractor turned realtor showed me a few houses to buy to live in.  Later while we were talking a guy I met from buying a desk from walked by and I talked with him and he mentioned his mother's house had a lien on it and he would sell to anyone just to pay off the lien.  Neither me nor the realtor had any money but we pooled resources and bought the house for about $14,000.  We formed a partnership (Sub S corp) and eventually bought more houses that were mostly buy and hold.  Neither of our spouses ever really got on board with it.  He had a lot of knowledge about fixing up houses, I did not.  He taught me a lot.  I was good at finances and was grunt labor for projects.  I was bringing home about $1,200 a month back then, he was making less.  I bought his half out for $300K cash I think back in 2013, the equivalent of 10 years of his salary when we started the company.  I am no genius, but worked with someone who knew some things.  We made money over time, not overnight.  We were probably around 20 doors when I bought him out.  Maybe partner with someone with a little know how on your first deal or 2.  Make sure it is someone who is completely honest and has a good work ethic.  A little knowledge is also great.  Having another person with the same dreams or goals is nice and and you can support each other.  It would be great to have our spouses be our big supporters, but that never happened for me, however my net worth from real estate vastly exceeds my net value of everything else I have accumulated from my day job.  If I retire before 65 it will only be because real estate made it possible.  Good luck to both of you, I know you can do it.

@Bill Exeter, wow would love to go to your seminar, but just got back from some time at the stock show and doubt I can get away again so fast. Have you contacted or posted in the Wyoming section? Cheyenne has the most active REI group in Wyoming.

@Account Closed, I respectfully disagree to a lot of the above.  First I believe having an LLc is a very good idea.  It is the cheapest insurance you will ever buy unless you overpay horribly for it.  It costs $102 and 15 minutes to form one in WY.  If you operate it correctly it will provide massive protection.  Next they don't protect from everything, nothing does that.  in my opinion the only lawsuts anonymous filings protect you from are frivolous lawsuits with very little merit.  if someone truly gets injured especially in a costly way, a lawsuit will be filed and discovery will rip through all your protections pretty dam fast.  Example someone wants to sue for $200K because a piece of ice fell of the roof of one of your rentals and hit them, they might not go too far.  Someone dies because you worked on the furnace and monoxide poisoning kills them, they will cut through the so called anonymity like a hot knife through butter.  Still LLCs are very useful, and even a meaningless anonymous trust probably won't hurt you.  If you self manage you will not escape potential liability by expecting anonymity to be a magic wand, but for the price of formation it is a LOT of protection.  Now if you remotely manage using property managers and do not do it yourself you probably could keep anonymous.

Hey @Jeff F., for my part I got another house rented.  The guy going to work in my old office called me on Thursday and lost the house he was moving into, and was moving Sunday.  I worked about 14 hour days on saturday and Sunday and got him moved in.  Now what's going on with your place?

Sorry @Josh Cook, being an attorney I took classes on legal entities and have read court cases, so I don't usually read books on it now or follow forums that explain it.  The big thing to understand is that it is considered a seperate legal person if you will.  You can't just take money from it, you have to have it's own separate bank account, it has to document how it does things, etc.  There are a lot of articles online, you might also look for legal education classes to attend, many are online, that help you understand how they work.

I have never heard of any state requiring you to have 2 companies. Many people prefer to have an LLC in their home state then create a new one in the state they invest in owned by the one in their home state.. There are pros and cons to both. If you are very hands on in your investing it changes things a lot.

With a credit card it is $102 to set up an LLC in Wyoming. You need a registered agent within Wyoming to do that. There are companies that provide that service and a principal place of business for $25 to $200 per year. There are lots of those companies listed on the secretary of states website. I don't begrudge an attorney charging a lot more if they provide service via education, etc., but a couple of grand to do a 30 minute filing seems a bit high. The operating agreements are a bit more expensive depending on how complicated they get.

Hey @Jeff F., don't want to bug you but would love an update if you have time.  this is one of my favorite threads.  What I am hearing is that Cheyenne is staying strong.  My local market is a tiny bit weaker I think.  By the way I mis-spoke in one of my last posts it was a 4plex, not a duplex.  I have turned down several applicants.  We finally accepted a young couple and they are supposed to bring in money to secure the deposit while their 30 day notice runs.  They talked to my resident manager and mentioned a friend they want to move in who has 2 large dogs.  I said no go to either.  We will see how it shakes out.  My 3 houses are still problematic.  One had the entire upstairs updated, new carpet, new vinyl in the kitchen and bathroom, touched up walls, new bathroom vanities, some new lights, my new handyman wanted to rent it, so I said OK but didn't do my regular background check, didn't even do a lease hehe dumb lawyer.  Fixed up some walls, new paint, he moved his assistant into the basement, (large house), they got drunk, got into a fight.  Several drunk calls later one in jail, the other headed out of town as fast as his car would take him.  No good deed goes unpunished.  As I am the local prosecutor for a few more weeks, I had to chinese wall his case and stay away from it.  He is now out of jail and sober, and I am getting the second house redone.  New carpet upstairs, new lights, new outlets, scrapped off popcorn ceilings, texture that, new paint, new bathtub, with new tile (1970s forest green is kind of out of style), and soon a new vanity.  I am trying to rent the 3rd house as is (not to a contractor who I didn't check out hehe), but no luck so far.  I feel your pain bud.  I hope you get your appraisal to come out well.  

I hope you had a great Christmas and I wish you a Happy New Year.